Introduction: Why Washington Crypto Investors Must Pay Attention in 2025

Cryptocurrency adoption is rapidly increasing, and Washington State has emerged as a critical jurisdiction for crypto tax compliance. With the introduction of the state capital gains

tax and evolving IRS regulations, crypto investors must now navigate a two-tiered tax structure: federal and state. This guide breaks down everything you need to know as a

Washington-based crypto trader or investor for the 2025 tax year.

1. Overview of Washington’s Capital Gains Tax in 2025

While Washington State does not levy a personal income tax, it implemented a capital gains tax starting in 2022, which directly impacts long-term cryptocurrency gains. In 2025, the law was further refined to include:

Key Updates:

• Applies only to long-term gains (assets held longer than one year)
• Standard deduction: ~$270,000 (adjusted for inflation)
• Graduated tax structure:
  • 7% on the first $1 million in net long-term gains
  • 9.9% on gains exceeding $1 million

Who Is Affected?

• Washington residents/domiciliaries at the time of crypto asset sale
• Individual investors—not businesses or institutions

Washington Crypto Capital Gains Tax Calculator 2025

Calculate Tax Owed

Note: Short-term crypto gains (≤1 year) are not subject to Washington’s capital gains tax but remain taxable at the federal level.

2. Federal vs. Washington Crypto Taxation: What’s the Difference?

Feature	Federal IRS Rules	Washington State Law
Short-Term Gains	Taxed as ordinary income (10–37%)	Not subject to WA capital gains tax
Long-Term Gains	0%, 15%, or 20% depending on income	7% up to $1M; 9.9% over $1M
Deduction Threshold	Limited	~$270,000 standard deduction
Applies to Crypto?	Yes	Yes (if long-term & WA resident)
Reporting Deadline	April 15, 2026 (for TY 2025)	Same as federal deadline

3. How to Determine Your Crypto Tax Liability in Washington (2025)

Step-by-Step:

1. Identify Washington Residency: Ensure you’re considered domiciled in WA when selling crypto.
2. Track Your Transactions: Document:
   • Acquisition & sale dates
   • Fair market value at disposal
   • Cost basis (purchase price + fees)
3. Determine Holding Period: Only crypto held >12 months qualifies as long-term.
4. Apply Deductions: Subtract $270,000 standard deduction from total long-term gains.
5. Calculate Tax Owed:
   • 7% on the first $1 million net gain
   • 9.9% on the excess

Example:

You sell Ethereum for a $1.2 million long-term gain.

• First $1M taxed at 7% = $70,000
• Remaining $200K taxed at 9.9% = $19,800
• Total WA tax owed: $89,800

4. Exemptions and Special Considerations

Exempt Assets:

• Real estate
• Retirement accounts (401(k), IRA)
• Certain small business stocks
• Timber & agricultural property
• Crypto held before 2022 (grandfathered assets)

Day Traders & High-Frequency Traders:

Short-term transactions (daily/weekly trades) are exempt from WA tax, but must be reported federally.

Strategic Tip:

If you’re near the $1M threshold, consider strategic disposal of assets over multiple tax years to avoid the 9.9% rate.

5. Crypto Reporting Requirements for 2025

What You Must Report:

• Total number of long-term crypto sales
• Group transactions by type (e.g., ETH, BTC)
• Individual asset sales are not required to be listed separately if grouped

Tools That Can Help:

• Koinly
• CoinTracker
• CryptoTaxCalculator

These platforms can auto-generate federal and Washington-specific tax reports.

Penalties for Non-Compliance:

• Failure to file: penalties up to 25% of tax owed
• Late payments: interest accrues monthly
• Willful evasion: subject to audits and legal action

6. Professional Advice Is Crucial

While this guide provides a comprehensive overview, navigating both federal and state crypto taxes is complex.

When to Seek Help:

• You made over $500,000 in long-term crypto gains
• You used decentralized exchanges or NFT marketplaces
• You are unsure of your domicile status

Recommended Professionals:

• Washington-based CPAs with crypto tax specialization
• Enrolled Agents (EAs) with IRS representation rights
• Crypto tax attorneys for complex scenarios

Conclusion: Your 2025 Action Plan

Washington’s capital gains tax marks a significant shift for local crypto investors. To stay compliant and minimize your liability:

• Track every transaction meticulously
• Confirm your holding periods for long-term classification
• Apply deductions and understand your tax bracket
• Report accurately on both the federal and state levels
• Consult a professional to validate your reporting strategy

Remember: Non-compliance can result in serious financial penalties. Be proactive. Get informed. Stay compliant.

1. Does Washington State tax cryptocurrency in 2025?
Yes, Washington taxes long-term crypto gains under its capital gains tax. Short-term gains are not taxed at the state level but are taxed federally.

2. What is the capital gains tax rate for crypto in Washington in 2025?
Washington charges 7% on the first $1 million in net long-term gains and 9.9% on gains above $1 million, after applying a standard deduction (~$270,000).

3. Are short-term crypto trades taxed in Washington State?
No, short-term gains (crypto held for one year or less) are not subject to WA capital gains tax, but are still taxed under federal law.

4. How do I file Washington’s crypto capital gains tax?
Washington’s tax return aligns with the federal filing deadline (April 15, 2026, for 2025 taxes). You must report net long-term crypto gains and apply deductions.

5. Are NFTs and DeFi activities included in Washington’s crypto tax law?
Yes, if they result in long-term capital gains and you’re a Washington resident, they may be subject to WA capital gains tax depending on the asset and holding period.

6. Do I need to report my crypto to Washington if I didn’t sell anything?
No. If you didn’t sell or realize gains, you typically don’t owe state capital gains tax, but you should still keep records for future years.

7. Can crypto losses offset gains in Washington State?
Washington does not allow loss carryforwards or offsets for capital gains tax. Only the net long-term gains after deductions are taxable.